VDPP, LLC v. VOLKSWAGEN GROUP OF AMERICA, INC.

Authored by: Jeremy J. Gustrowsy

The Federal Circuit affirmed a Texas district court’s dismissal of a patent infringement complaint, an accompanying $207,543.60 attorney fee award, and dismissed the portion of the appeal challenging sanctions against the plaintiff’s counsel. The case involved VDPP, LLC’s suit against Volkswagen Group of America over U.S. Patent No. 9,426,452, which covers electrically controlled spectacles.

VDPP sought leave to amend its complaint after Volkswagen moved to dismiss, but the district court found the proposed amendment futile. The Federal Circuit agreed, focusing on VDPP’s failure to plead compliance with the patent marking statute, 35 U.S.C. § 287(a). While VDPP argued it was a non-practicing entity with nothing to mark, the court reminded VDPP that a patentee’s licensees must also comply with the marking requirement. VDPP had entered into eleven settlement agreements licensing the ‘452 patent to various parties, yet the proposed amended complaint said nothing about licensee compliance beyond bare legal conclusions that “all statutory requirements” and “all conditions precedent” had been met.

The court rejected VDPP’s argument that settlement-based licenses should be treated differently from ordinary licenses, noting prior precedent holding that a patent license is essentially a promise not to sue, regardless of whether it is framed as a covenant or a license. It also rejected the notion that a licensee’s refusal to admit infringement matters, because the marking analysis focuses on the patentee’s actions, not the infringer’s subjective view. One of VDPP’s settlement agreements even expressly relieved the licensee of any obligation to mark, and VDPP continued to insist that all licensed products infringed. Under these facts, no amendment could plausibly allege reasonable efforts to ensure licensee compliance.

On the fee award, the Federal Circuit found no abuse of discretion in the district court’s exceptional-case determination under 35 U.S.C. § 285. The district court had identified multiple frivolous positions, including seeking future damages and an injunction on an expired patent, pursuing past damages despite the marking problem, failing to disclose the eleven settlement agreements, and prolonging litigation with false statements about those agreements. VDPP’s excuse that its president suffered from a memory disorder did not justify relying on his representation that no settlement agreements existed, especially since Volkswagen had repeatedly told VDPP about the licenses in letters, motions, and emails. The court also permissibly considered VDPP’s pattern of repeat litigation involving settlement demands far below the cost of defense.

The Federal Circuit dismissed the appeal of sanctions against VDPP’s counsel, William Peterson Ramey, III, for lack of jurisdiction. Mr. Ramey’s notices of appeal named only VDPP as an appellant, with his misspelled name appearing only within a list of orders being appealed. Because the sanctions order held both VDPP and Mr. Ramey jointly and severally liable, the notice did not make clear that Mr. Ramey was appealing personally rather than merely representing his client. Corrected notices filed months later were untimely under Rule 4.

The court also rejected VDPP’s argument that it had standing to contest the sanctions on Mr. Ramey’s behalf, noting VDPP suffered no injury and actually benefited from having its counsel jointly liable for the fees. The decision reinforces that patent owners with licensees must plead facts showing licensee compliance with marking obligations to preserve pre-suit damages, and that non-practicing entity status alone does not sidestep this requirement.